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COBRA Subsidy Extension – 6 additional months

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December 22, 2009

The COBRA Subsidy provided by the American Recovery and Reinvestment Act of 2009 (ARRA) has been extended by the Department of Defense Appropriation Act, 2010 (DDAA) which was recently signed into law. The DDAA amends certain provisions of ARRA related to the COBRA Subsidy. These amendments are effective retroactively to the date of enactment of ARRA and are briefly described below.

The DDAA amends ARRA to provide for and additional period of 6 months of COBRA Subsidy, extending the COBRA Subsidy period from 9 months to a total of 15 months.

Additionally, the COBRA Subsidy eligibility period is extended beyond December 31, 2009 for 2 additional months, ending on February 28, 2010.

COBRA Subsidy eligible individuals who fall within the “transition period” are allowed to pay past due premiums retroactively and maintain COBRA coverage. Payments of past due periods must be made within 60 days of the enactment of DDAA or within 30 days from the date on which the individual receives the notice mandated by the DDAA.

“Transition period” means with respect to any COBRA Subsidy eligible individual, any period of coverage if: (a) such period begins before the date of the enactment of DDAA, and (b) the premium reduction payable under ARRA would apply to that period pursuant to the DDAA amendment extending the maximum period of the COBRA Subsidy to 15 months.

For example,

  • if an individual would have been receiving the COBRA Subsidy on the 10th month through the 15th month of his or her COBRA coverage period had the original period of COBRA Subsidy been 15 months instead of 9 months, and
  • the DDAA is enacted at any time on or after the 10th month, but before the 15th month of COBRA coverage, then

such individual’s “transition period” would run from the 10th month through the 15th month of COBRA coverage.

Notification

A notice informing assistance eligible individuals of the amendments to ARRA introduced by the DDAA must be sent by the administrator of the group health plan, within 60 days after the enactment of DDAA to individuals who on or after October 31, 2009:
  • were eligible for assistance at any time after such date,
  • experience a qualifying event (termination of employment) relating to COBRA continuation coverage, or
  • were eligible for assistance at any time after such date and did not timely pay the premium for any period of coverage during such individual’s “transition period,” or paid the full premium, without the benefit of the subsidy reduction.

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